Audio House, Inc., is developing its annual financial statements at December 31, 2013. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows:

Additional Data:
a. Bought equipment for cash, $60,000.
b. Borrowed an additional $11,000 and signed an additional long-term note payable.
c. Issued new shares of stock for $5,000 cash.
d. Dividends of $5,000 were declared and paid in cash.
e. Other expenses included depreciation, $15,000; wages, $20,000; and taxes, $25,000.
f. Accounts payable includes only inventory purchases made on credit
Required:
1. Prepare the statement of cash flows for the year ended December 31, 2013, using the indirect method.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash during2013.

Transcribed Image Text:

2013 2012 Balance sheet at December 31 $ 64,000 $ 65,000 Cash Accounts receivable 15,000 20,000 Inventory Property and equipment Less: Accumulated depreciation 22,000 20,000 210,000 150,000 (60,000) (45,000) $251,000 $210,000 $ 8,000 $ 19,000 Accounts payable Taxes payable Note payable, long-term Contributed capital Retained earnings 2,000 86,000 1,000 75,000 75,000 70,000 80,000 45,000 $251,000 $210,000 Income statement for 2013 $190,000 Sales Cost of goods sold Other expenses 90,000 60,000 $ 40,000 Net income